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Ladies and gentlemen, start your engines

With sensor-loaded cars poised to reduce accidents by 90 percent,1 and ride-sharing/ride-hailing trends pointing toward decreased vehicle ownership,2 the auto insurance industry could be challenged to compensate for the apparent inevitability of falling premium rates and perhaps a substantial volume of business.

Our new report explores how insurers can develop transformational strategies to remain relevant and create value for consumers, yet still be profitable in this emerging environment.

Action without insight could be doomed

Global consumers seem divided among regions and age groups regarding the level of desirability for autonomous vehicles (AVs) technology and ride sharing/ride hailing.3

Autonomous vehicles: While many motorists, particularly in more developed countries, remain uncomfortable sharing the road with self-driving cars and most still say they don't want to own them, they did indicate they would be willing to try them once there was an established safety record.4 Consumers surveyed in more emerging economies, such as India and China, as well as younger demographics in the United States, Germany, Japan, and India appear more enthusiastic about near-term increased autonomy of vehicles.5

Looking at the bigger picture, regardless of geography, technologies that most consumers really want embedded in their vehicles seem to be focused on safety, as opposed to "service enablers" that they would prefer to get on their smartphones.

Ride sharing/ride hailing: The rise of pay-per-use ride-sharing services is expected to lead to a decrease in individual car ownership down the road, at least in urban areas.

As the driving economy evolves, insurers worldwide would need to fully understand consumer acceptance of the future states of mobility and the tech that drives them, in various regions and among different age groups, to adapt their responses accordingly.

Insurers should jump on the bandwagon

The transitional timeframes wherein AVs could share the road with human-driven vehicles, and the longer term, when self-driving cars may dominate, will likely force a fundamental shift in insurers' product mix, as they would for underwriting, pricing, and business models.

These changes could prompt the following actions:

Recognize that rate of change by geography and age may vary

Develop more technical underwriting capabilities

Prepare for incremental changes to cost structures

Navigate with insufficient or incomplete data, and exploit emerging sources

Getting onboard: When one door closes, another one opens

Insurers will likely need to quickly find their footing through the transitioning mobility ecosystem.

They cannot afford to be laggards when it comes to modernization, given the fundamental shift taking place in their insurable exposures. Disruptive forces confronting the auto insurance industry seem to demand quick and nimble responses to maintain relevance amid a changing risk landscape and the potential for heightened competition from both traditional and non-traditional sources.

It is likely that only those insurers with a flexible business model and diverse product mix may thrive going forward, as technological and societal trends take hold at an uneven pace in the autonomous vehicles and insurance industries.

See below for a recap of what insurers might do to fortify their positions.

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Managing Director | Center for Financial Services

Jim is the managing director of the Deloitte Center for Financial Services, where he is responsible for defining the marketplace positioning and development of the Center’s eminence and key activities... More

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